Electronic Journal

Vol. 4 (2016) pp.
109-126
Agency Contract under Conventional Law and

Islamic Law as Manifested in the Civil Code of
Oman: A Comparative Analysis
by Muhammad Masum Billah
Vol. 4 (2016)
Editor-in-Chief
Prof. Dr. Andrea Büchler, University of Zurich,
Switzerland
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Prof. Dr. Bettina Dennerlein, University of Zurich,
Switzerland
Assoc. Prof. Dr. Hossein Esmaeili, Flinders University,
Adelaide, Australia
Prof. Dr. Clark B. Lombardi, Director of Islamic Legal
Studies, University of Washington School of Law, USA
Prof. Dr. Gianluca Parolin, American University in Cairo,
Egypt
Prof. Dr. Mathias Rohe, Friedrich-Alexander-Universität
Erlangen-Nürnberg, Germany
Dr. Eveline Schneider Kayasseh, University of Zurich,
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Dr. Prakash A. Shah, Queen Mary, University of London,
UK
Dr. Nadjma Yassari, Max Planck Institute for
Comparative and International Private Law, Hamburg,
Germany
Vol. 4 (2016)
Published by
The Center for Islamic and Middle Eastern
Legal Studies (CIMELS), University of Zurich,
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Agency Contract under Conventional Law and Islamic Law as Manifested in the Civil Code of Oman: A Comparative
Analysis| by Muhammad Masum Billah
Agency Contract under Conventional Law and

Islamic Law as Manifested in the Civil Code of
Oman: A Comparative Analysis
by Muhammad Masum Billah*
Table of Contents
I. Introduction ............................................................................................................... 109
II. Agency under Islamic Law (as Reflected in the Civil Code) and
Conventional Law
Part 1: Definition, Conditions, and Classification of Agency ............................. 110
Part 2: Duties and Rights of an Agent .................................................................... 116
Part 3: Termination of Agency ................................................................................ 123
III. Conclusion .................................................................................................................. 126
Abstract
The paper analyzes the main principles of agency under Islamic law as reflected in the Civil Code of Oman and
compares them with conventional law. Upon comparative analysis, the paper concludes that the main principles of
agency contract under both systems of law are very similar. Some differences do exist in the details and in the
application of main principles to some specific cases. While these minor differences may be important in an actual
case of agency, they do not make the Islamic law on agency dramatically different from the conventional law on the
subject matter.
* Assistant Professor, College of Law, Sultan Qaboos University, Oman; LL.D (University of Ottawa), LL.M (University of
Alberta), LL.B (International Islamic University Malaysia)
Electronic Journal of Islamic and Middle Eastern Law | Vol. 4 (2016) 109
I. Introduction
1. General Remarks
The contract of agency is one of the most important contracts in the commercial settings both
under Islamic and conventional legal systems. Corporations, partnerships, securities, law
firms, firms of accountants, investments, insurance, shipping, all involve contracts of agency.
Many products of Islamic banking and finance are tied to the concept of agency in one way or
another.1 The paper analyzes and compares the main principles of agency both under
conventional law2 and under Islamic law as reflected in the Civil Code of Oman.3 The paper
concludes that these principles are very similar under both systems. Some differences,
however, exist in the details and in the application of main principles to few specific cases. The
main principles of agency analyzed in the paper are those mentioned under the Civil Code of
Oman. These principles include the concept of agency contract, its conditions, and
classifications, rights and duties of agents, and the termination of agency relationship.
In 2013 Oman adopted its Civil Code containing one thousand and eighty six sections and
covering a wide range of topics from basic principles of contract and tort to the specific types of
contacts such as sale, lease, loan, guarantee, mortgage, etc. Contract of agency is covered under
sections 672 to 698. Like the most provisions in the Civil Code, the provisions on the contract of
agency reflect mainly the principles of Islamic law on agency. The provisions of the Civil Code
cover the basic principles of agency. Books on Islamic law contain much more detailed
provisions on agency contract. Any gap in the Omani Civil Code, however, can be filled from
those sources as indicated clearly in the very first section of the Civil Code.4 In addition, Islamic
schools of jurisprudence sometimes differ in their rulings in some aspects of agency. Where
1 As Islamic banks do not make direct financial loan, most products of Islamic banking in consumer financing involve the
sale of a commodity to clients. Initially, the banks appoint their clients as agents to buy the commodity from the market on
behalf of the banks. Then the banks sell the same commodity to the clients. The financing of the particular commodity is
the very reason the client approaches an Islamic bank in the first place. See BILLAH MUHAMMAD MASUM, Extensive
Use of Ḥilah in Islamic Banking and Finance, Islamic Quarterly, Vol. 59 (2015) pp. 65-88 at 66-68.
2 Our reference to conventional law is mainly to Anglo-American common law as well as to the provisions from various
pieces of Omani legislation which are not modelled on Islamic law (e.g., Commercial Code, Royal Decree No. 55/90,
published in Official Gazette (no. 435) (Ministry of Legal Affairs, Oman: July 19, 1990), amended by Royal Decree nos. 3/91
and 75/2010; Companies Law, Royal Decree No. 4/74, published in Official Gazette (no. 56) (Ministry of Legal Affairs, Oman:
June 01, 1974), amended by Royal Decree nos. 54/75, 53/82, 32/84, 13/89, 83/94, 16/96, 26/96, 66/97, 39/98, 85/99, 77/2002,
41/2005, 99/2005; and Capital Market Law, 80/98), published in Official Gazette (no.635) (Ministry of Legal Affairs, Oman:
November 15, 1998), amended by Royal Decree nos. 18/2002 and 5/2007).
3 Royal Decree No. 29/2013; published in Official Gazette (no. 1012) (Ministry of Legal Affairs, Oman: May 12, 2013) at 5-199.
The literal translation of the title of the code is ‘Civil Transactions Law,’ for brevity and convenience, we would use the
words ‘Civil Code’.
4 Section 1 of Civil Code reads, ‘The provisions of Civil Code in their words and meaning would apply to all issues covered by
its provisions as well as to issues not covered by any special legislation. In case there is no specific provision in the Civil
Code, the court will decide the matter using the provisions of Islamic law. If there is no clear provisions of the Islamic law
on the matter, the matter would be decided using the general principles of shari‘ah. If there is no such general principle of
shari‘ah, the issue would be decided in light of custom.’ [Translation is provided by the author.] It is noteworthy that the
Civil Code did not specify a particular school of jurisprudence in case of differences among various schools on a matter not
covered by the Civil Code. This may give rise to some uncertainty or inconsistency in the application of Islamic law to
actual cases. However, as the majority of Omani citizens follow the Ibaadhi School of Jurisprudence, preference may be
given to the opinion of this school over those of others.
relevant, the paper would indicate the view of a particular school or jurist on an aspect of
agency.
After a brief discussion on different sets of rules under Omani law to govern the agency
contract, the paper would take up the analysis of the main principles of agency under Islamic
law as appeared in the Civil Code and compare them with conventional law.
2. Different Sets of Rules on Agency Contract in Oman

Oman has three sets of legal provisions on agency contract. The first set was issued in 1977
under the title of Commercial Agency Law.5 This law mainly governs the issuance of license to
individuals and companies which intend to sell the products of foreign manufacturers and
suppliers in Oman. In strict legal sense, these individuals and companies may not be
considered as ‘agents’ as they sell the foreign-manufactured products to their buyers through
independent contracts made in their own name and not on behalf of the foreign manufacturers
and suppliers. The second set of provisions on agency is found in sections 276 to 338 of
Commercial Code, issued in 1990.6 These provisions predate the Civil Code and would apply to
commercial transactions.7 On the other hand, the provisions of Civil Code on agency would
apply to a civil transaction related to agency. This set of the provisions is the focus of our
analysis in the paper.
II. Agency under Islamic Law (as Reflected in the Civil

Code) and Conventional Law
Part 1: Definition, Conditions, and Classification of Agency
The provisions on agency contract under the Civil Code are divided into three groups: general
provisions, provisions on the effects of an agency contract, and the provisions related to the
termination of an agency contract. General provisions cover the definition of agency contract,
its conditions and classifications, and some other related issues. The provisions on the effects of
an agency contract are divided into two parts: the obligations of an agent to his/her principal
and the obligations of the principal towards the agent. In our analysis, we would follow this
structure and the order with occasional cross references among different parts when necessary.
5 Royal Decree No. 26/77, published in Official Gazette (no. 126) (Ministry of Legal Affairs, Oman: June 01, 1977), amended
by Royal Decree nos. 82/84, 73/96 and 66/2005. The Act has twenty two sections in total.
6 Royal Decree No. 55/1990, supra n. 2.
7 See section 1 of Commercial Code, supra n. 2. Commercial transaction is defined under section 8 of Commercial Code as any
transaction made for the purpose of earning a profit even if the transaction is made by a non-merchant. Thus, it appears
that any agency contract under which the agent works for commission would be a commercial transaction and would be
subject to the provisions of Commercial Code on agency. However, section 690 of Civil Code also covers both paid and
voluntary agents. Strictly speaking, the contract of paid agency should be covered by the Commercial Code. This
inconsistency is probably due to the fact that under Islamic law, upon which the provisions of Civil Code on agency are
modelled, does not make any distinction between commercial and civil transactions.
1. What is agency?
Agency is defined under section 672 of the Civil Code as a contract under which a principal
appoints another person in his place to conduct a known and a valid transaction. This
definition reflects the concept of agency under Islamic law8 and is very similar to the definition
of agency under conventional law. For example, the American Law Institute’s Restatement of
Law defines agency as “the fiduciary relationship that arises when one person (a “principal”)
manifests assent to another person (an “agent”) that the agent shall act on the principal's behalf
and subject to the principal’s control, and the agent manifests assent or otherwise consents so
to act.”9 However, a ‘valid transaction’ under conventional law may not necessarily be a
permissible transaction under Islamic law. For example, buying interest-bearing bonds through
an agent (i.e., stock exchange broker) is a valid transaction under conventional law10 but would
be invalid under Islamic law due to the involvement of interest (riba) in the transaction.11
Similarly, buying some commodities through an agent when both the price and the delivery of
the goods would occur in the future (i.e., a forward contract) would not be a valid contract
under Islamic law12 but can be enforced under conventional law including under the
Commercial Code of Oman.13
The religious validity of a transaction under an agency contract may become important in an
Islamic banking and finance transaction involving agency. For instance, in the case The
Investment Dar Company KSCC v. Blom Developments Bank SAL,14 two Islamic financial
institutions entered into a wakalah (agency) contract under which the bank (Blom) appointed
the investment company (The Investment Dar) as its agent to invest some fund (US$11.5 m) in
shari‘ah-compliant instruments with an agreed anticipated profit to be paid quarterly. In 2008,
the investment company was unable to pay the anticipated profit and, as a result, the bank
brought an action in English court to get its money back together with the anticipated profit.
The court of first instance issued summary judgment against the investment company and
ordered it to pay the original amount of investment fund. The investment company appealed
against the summary judgement and argued that the agency contract was void as it violated
Islamic law due to the undertaking of fixed profit in the contract. The UK High Court allowed
the appeal against the summary judgment mainly on the ground that the case involved
sufficient contentious issues to be resolved in a formal trial.
8 For example, in the Ottoman codification of Hanafi law, The Mejelle (Book XI) (translated by Judge C. A. Hooper and
reproduced in Arab Law Quarterly, Vol. 4 (1989) pp. 244-253) (hereinafter Mejelle), agency is defined in article 1449 as
“Agency consists of one person empowering some other person to perform some act for him, whereby the latter stands in
the stead of the former in regard to such act.”
9 Cited in MUNDAY RODERICK, Agency: Law and Principles, 2nd ed., Oxford 2013, at 1 para 1.01.
10 See section 87 of Companies Law, Royal Decree No. 4/74, supra n. 2, which allows a joint-stock company to issue bonds
with fixed interest rates.

11 See generally, SALEH NABIL, Unlawful Gain and Legitimate Profit in Islamic Law: Riba, Gharar and Islamic Banking,
Cambridge 1986, at 87-88; BILLAH MUHAMMAD MASUM, The Prohibition of Riba and the Use of Ḥiyal by Islamic Banks to
Overcome the Prohibition, Arab Law Quarterly, Vol. 29 (2014) pp. 398-408 at 403.
12 When both the price and the sold item are deferred, the transaction is considered as a sale of debt for debt. Such sale is not
permitted under Islamic law. See USMANI MUHAMMAD, Introduction to Islamic Finance, Karachi 2010, at 187.
13 This can be implied from the reading of section 100 (which allows the sale of goods not available at the time of the
contract) together with section 113 (which indicates that the price can be deferred) of Commercial Code of Oman, supra n. 2.
14 The Investment Dar Company KSCC v. Blom Developments Bank SAL [2009] (EWHC 3545 (ch)).
2. Conditions of agency
The conditions of agency mentioned under section 673 of the Civil Code are: 1) the principal
must himself have the legal right to enter the transactions which he delegates to an agent, 2)
the agent must have the legal capacity to complete the delegated transaction, and 3) the
delegated transaction or activity is known and is suitable for delegation.
These conditions of agency under the Omani Civil Code reflect Islamic law on the matter and
are very similar to those under conventional law. Under both Islamic law and conventional
law, a person can delegate an act to another person only if the former can complete the act by
him- or herself.15 In other words, the principal must have the legal capacity to do the delegated
task by himself. Although this general principle is applicable both under Islamic law and
conventional law, its application would bring different results to some specific cases based on
the contractual capacity of a person under the relevant Islamic or conventional laws. For
example, under the common law an enemy alien does not have the legal capacity to enter into
a contract with a local resident. Thus, any contract made on behalf of such a person by a local
agent would be void ab initio.16 In the context of Islamic law, non-Hanafi schools view that a
woman does not have the legal capacity to marry herself without the permission of her
guardian. As such, she also lacks the capacity to appoint an agent to accept a marriage
proposal on her behalf. Similarly, as the non-Hanafi schools do not allow a person in ihram (i.e.,
in the state of ritual purity for pilgrimage) to marry, such a person cannot also appoint an
agent for the same purpose.17
In determining the above condition, the main emphasis lies on the legal capacity of the
principal as opposed to his physical capacity. For example, even though it is physically
impossible for a company as an inanimate juristic person to enter into contract, the company
has the legal capacity to make such contract and thus can appoint an agent (e.g., directors or
employees) to enter into many legal transactions.18 Similarly, a blind person does not have the
required physical capacity to enter into a transaction which requires the inspection of sold
items. However, a blind person can appoint an agent to enter into such a transaction on his
behalf.19 In fact, one of the very reasons a person may appoint an agent is that it is physically
impossible for the principal to be present in more than one place at the same time to look after
his various business interests.
Like the principal, the agent too must have the legal capacity to complete the delegated task.
Thus, as the non-Hanafi schools do not allow a woman to get married by herself without the
15 See article 1459 of Mejelle, supra n. 8; ARCHER GLEASON, The Law of Agency, Chicago 1915, at 46 (“Generally speaking,
anything that a principal may lawfully do if acting in person he may delegate to agents.”).
16 See Boston Deep Sea Fishing & Ice Co Ltd v. Farnham (Inspector of Taxes), [1957] 3 All ER 204.
17 See AL-ZUHAILI WAHBAH, Financial Transactions in Islamic Jurisprudence, (translated by Mahmoud A El-Gamal), Beirut 2011,
at 638 (v.1).
18 The Civil Code of Oman recognizes the legal personality of companies. See section 48(4) of the Civil Code, supra n. 3. While
classical Islamic jurisprudence is silent about the legal personality of a business organization, many contemporary Islamic
scholars approve the concept of legal personality under Islamic law. See OIC (Organization of Islamic Conference) Fiqh
Academy Decision no. 63/1/7 (paragraph 12), seventh session, May 9-14, 1992, in Resolutions and Recommendations of the
Council of the Islamic Fiqh Academy 1985-2000, Jeddah 2000, at 130; also USMANI, supra n. 12 at 221-232.
19 See AL-ZUHAILI, supra n. 17 at 638.
permission of her guardian, she cannot be also an agent to conduct a marriage for others.20 As
for the minor who reached the discerning age (sinn al tameez) but not the age of majority (sinn al
rushd),21 even though he may not appoint an agent to conduct a financial transaction unless the
transaction is beneficial for the minor,22 there appears to be no restriction under the Omani
Civil Code on such a minor to act as an agent.23 The provision reflects the view of the Hanafi
School, which allows such a person to act as an agent even if he cannot do a similar task for
himself.24 This view is more sensible as the role of a minor in such a situation is simply to
follow the order of his principal. The maturity of the person who issues the order is more
important than that of the person who follows the order. Conventional law on agency also
adopts this approach in allowing a minor to act as an agent. As long as a minor is mentally and
physically fit to carry out the delegated task, any transaction entered by him in carrying out the
task on behalf of his principal is valid.25
The third condition of an agency contract is that the delegated task must be suitable for
delegation. Not every action can be delegated under Islamic law. Thus, pure acts of worship
(‘ibadah) such as prayer, fasting etc. are not suitable for delegation to others as they require
personal performance and piety.26 Although there are differences of opinion about the
delegation of an act of worship which also has financial dimension such as pilgrimage to
Mecca and compulsory alms tax (zakah), the Civil Code is silent on this matter. As they are
personal religious obligations, the Civil Code did not side with one opinion over the other.
People are free to choose whatever view they find acceptable to them.
Finally, the delegated transaction or activity must be known.27 Thus, an agency contract is not
valid if the object of agency is not clearly identified. For example, if the principal asks the agent
to buy an animal without specifying its genus and type, the agency is not valid due to
excessive gharar (uncertainty).28 Similarly, if the principal asks the agent to buy a piece of land
without specifying its location and price, the agency is not valid.29 In conventional law, on the
other hand, an agent with ambiguous instructions must try to get clarification from the
20 See AL-ZUHAILI, supra n. 17 at 639.

21 Under the Civil Code of Oman, supra n. 3, a child who has reached seven years of age is considered a discerning child
(section 42(2)). On the other hand, the age of majority (sinn al rushd) is eighteen years (section 41(2)).
22 See section 93 of Civil Code, supra n. 3. Where a transaction (e.g., trading) may bring either profit or loss, a discerning child
can appoint an agent only if the child is given permission by his guardian to do such tasks or if the child ratifies the
transaction upon reaching the age of majority. See article 1457 of Mejelle, supra n. 8; see also section 93 of the Civil Code, ibid.
This is the view of Hanafi School. Other schools do not allow such agency mainly because such a child is not allowed to
enter into this type of transaction by himself. See AL-ZUHAILI, supra n. 17 at 638.
23 Section 94 of Civil Code, supra n. 3, provides that a minor who was given ‘permission’ to enter into a transaction would be
treated like a person who has reached the age of majority (sin al-rushd). Under section 679 of Civil Code, permission is one
of the means through which agency can be established.
24 See article 1458 of Mejelle, supra n. 8. The view is supported by the incident of the Prophet (PBUH) appointing Ibn Umm
Salamah as his agent to conduct the Prophet’s marriage.
25 ARCHER, supra n. 15 at 30-31. See Talbot v. Bowen, 1 A. K. Marsh (Ky.) 436, R. 42, H. 40, where a contract entered by a
minor on behalf of his father was held valid.
26 The Maliki scholars do not allow agency for pilgrimage to Mecca on the ground that the financial aspect in the pilgrimage
is minor and transitory.
27 Section 673 of Civil Code, supra n. 3.
28 See the second paragraph of article 1459, article 1468, and articles 1475-1477 of Mejelle, supra n. 8.
29 Article 1475, and also articles 1476 and 1477 of Mejelle, ibid.
principal. If it is not possible to get the timely clarification, the agent is to try his best to
ascertain the reasonable meaning of the instructions and work accordingly.30
3. Classification of Agency
There are four types of agency mentioned under sections 674 and 675 of the Civil Code:
unrestricted (mutlaq) agency, restricted (muqaiyad) agency, general or comprehensive (‘aam)
agency, and special (khas) agency. A general agency (also known as ‘universal or
comprehensive agency’) covers all transactions which a principal can do by himself or herself
provided that the transactions can be legally delegated.31 Under section 677 of the Civil Code,
however, even a general agency would not cover the following transactions unless they are
specifically mentioned in the agency contract: donations, settlement, debt forgiveness,
arbitration, loan, and matters related to personal status (al ahwal al shaksiyah).
On the other hand, a special (khas) agency would exist if the delegated authority is confined to
one or more specific activities.32 In such case, the agent is allowed to do only the specified
activity on behalf of the principal and the necessary related activities.33 For example, an agent
authorized to sell a car of his principal has to complete the procedures related to the transfer of
ownership and insurance to the new buyer. However, if the task has various aspects and each
aspect requires special skill and is usually done by separate individuals, an agent authorized
for one aspect of the whole task is not automatically authorized for the other aspect/s of the
task unless mentioned specifically in the agency contract. This is mainly due to the fact that an
agent may not have the necessary skills for all aspects of a large complicated transaction. For
example, section 687 of the Civil Code provides that an agent for collection [of debt] does not
have the authority for litigation and the agent for litigation cannot collect the compensation
awarded after such litigation unless there is specific permission from the principal. This reflects
the view of the majority of Islamic jurists with the exception of some earlier Hanafi jurists.34
Both general agency and special agency may be unrestricted (mutlaq) agency. For example, if
an agent is authorized to sell a car of his principal without any specifications or restrictions
from the principal with regard to the price, time, and place of the sale, this would be an
example of special (khas) but unrestricted (mutlaq) agency. The agent can sell the car at any time
to anyone and at any suitable price.35 On the other hand, if the principal fixed the price or a
30 See MUNDAY, supra n. 9 at 49-50 para 3.14-3.15. See also Ireland v. Livingston (1820) 3 B & Ald 616; cited in MUNDAY, ibid at
49 para 3.14.
31 Section 675 of Civil Code, supra n. 3. A general agency is not permissible according to Shafii’ and Hanbali Schools due to
massive uncertainty (gharar). On the other hand, the Hanifi and Maliki Schools allow this kind of agency on the ground
that when each of the tasks under a general agency can be delegated separately, all these tasks can be also delegated
together under a general agency. AL-ZUHAILI, supra n. 17 at 634.
33 Section 676 of Civil Code, ibid.
34 AL-ZUHAILI, supra n. 17 at 655; articles 1519 and 1520 of Mejelle, supra n. 8. As for debt collection, the earlier Hanafi jurists
differentiated between the collection of fungible and the collection of non-fungible debt. In the case of fungible debt such
as money, the agent has the right to engage in legal dispute because in such case the agent is considered as the contracting
party for collecting debt like the case with a sale contract. As for non-fungible, the agent is not allowed to engage in
litigation. The agent in such case is considered merely a messenger and not an agent. See AL-ZUHAILI, ibid at 656-658.
35 According to non-Hanifi jurists, an unrestricted agent is not allowed to make any admission of liability on behalf of his
principal because he is appointed to establish the rights of the principal. Hanafi scholars allow a legal agent to make
admission of liability as long as it does not result in legal punishment or legal revenge (qisas). Similarly, non-Hanafi jurists
specific buyer, the agent cannot sell the car below that price or to anyone other than the specific
person. However, the agent is allowed to sell at a higher price as that would be beneficial for
the principal.36 A general (‘aam) agency can be also restricted (muqaiyad). For example, even if
an agent has the authority to do any transaction on behalf of the principal, the principal may
require the agent to inform the former before completing a transaction if the transaction
involves a large amount of money.37
The classification of agency under Islamic law as stated in the Civil Code is very similar to the
types of agency under conventional law. For example, in his classical book on agency Professor
Gleason Archer mentioned three types of agents: universal agent, general agent, and special
agent.38 A universal agent has the authority to enter into any delegable transaction on behalf of
the principal. This is very similar to the universal (‘aam) agency under Islamic law. On the
other hand, a general agent is authorized to make any transaction in a particular area of
principal’s business or any transaction at a particular place, whereas a special agent is
authorized to make a specific transaction or a series of specific transactions on behalf of the
principal. A general agent under conventional law is similar to mutlaq agent under Islamic law,
whereas special agency under conventional law can be considered as either as khas or as
muqiayad agency under Islamic law.
The above classification of agency does not give rise to much problem in the actual cases of
agency as the type and scope of an agent’s authority would be determined from the wording of
the principal’s instructions. If an agent exceeds his authority, the agent would be liable to the
principal for any loss the principal suffers both under Islamic law and conventional law. 39
However, under conventional law a principal may be bound by certain unauthorized
transactions of his agent entered with a third party if the transactions fall under either implied
or apparent authority of the agent. It is not clear whether the same result would follow under
Islamic law. In general, under Islamic law a principal is not bound by any transaction of the
agent beyond the scope of his authority.40 The cases of implied authority under conventional
law cover the situations where some aspects of an agent’s usual activities are restricted by the
principal but the agent still engages in such a restricted activity. In such cases, the principal
would be bound by a transaction of the agent with a third party who is unaware of such
restriction.41 On the other hand, the cases of apparent authority under conventional law
and majority of Hanafi jurists opine that an unrestricted selling agent is implicitly restricted to sell at a market price or at a
price close to the market price and must sell at cash price. Abu Hanifa, on the other hand, allows an unrestricted selling
agent to sell at any price he sees fit. This view was adopted in article 1494 of Mejelle, supra n. 8. As for an unrestricted
buying agent, all jurists agree that such an agent must buy at or close to the going market price. The different opinions of
Abu Hanifa with regard to selling and buying agents is due to the fact that a buying agent may buy something for himself
first at a price which he may later regret and may pass the purchased item to his principal. This possibility does not exist
in the case of a selling agent and he is thus given wider discretion. See AL-ZUHAILI, ibid at 653-655, 661-663.
36 See section 680 of Civil Code, supra n. 3.
37 Following the view of most jurists with regard to an unrestricted special agent, it can be argued that a general agent would
be also implicitly restricted by conventions and customs. See the discussion in supra n. 35.
38 ARCHER, supra n. 15 at 11-12.
39 See ARCHER, ibid at 121-122; section 680 of the Civil Code, supra n. 3.
40 See generally article 1470 of Mejelle, supra n. 8; section 680 of the Civil Code, ibid.
41 See The Unique Mariner [1978] 1 Lloyd’s Rep 438, where an agreement entered by the master of a ship with a salvage tug
was held to be binding on the owner of the ship despite the fact that the owner of the ship expressly instructed the master
to use only the salvage tug sent by the owner.
include situations where an agent does not have the authority to enter into a particular
transactions but he appears to have such authority because of certain representation (i.e., action
or omission) of the principal.42
Both Islamic law and conventional law recognize the subsequent ratification by the principal of
an earlier unauthorized transaction entered by an agent. Such ratification makes the
transaction effective retrospectively from the date it was entered. Section 679 of Civil Code
provides that a subsequent ratification is equivalent to prior permission.43 Thus, an
unauthorized act of an agent could be later ratified by the principal and the transaction would
be valid.44
Part 2: Duties and Rights of an Agent
1. Duties of an agent
a) Duty to follow the instructions of the principal

An agent must not exceed his authority. Fulfillment of this duty would be important when the
agency is restricted (muqaiyad), or special (khas). In such cases, the agent has to exactly follow
the principal’s instructions including restrictions, if any, unless he can prove that the
transaction would bring greater benefit for his principal despite the fact that he did not follow
the exact instructions or restrictions.45 For example, an agent authorized to sell a product at a
specified price (e.g., RO1,000) can sell it at a higher price, say, RO1,100. Similarly, if an agent
authorized to buy a property at a specific price is able to buy it at a lower price, the contract
would be binding on the principal.46 Under conventional law too, one of the most important
obligations of an agent is to follow the instructions of the principal. The failure of an agent to
follow the instructions of his principal would make the agent liable for any loss suffered by the
principal.47 On the other hand, an agent would not be liable for any financial losses suffered by
42 See Summers v Solomon (1857) 7 E1 & B1 879, where the principal was held bound by a transaction entered by a former
employee (agent) with a wholesale merchant with whom the principal had regular credit transaction through that
employee. The principal failed to inform the merchant about the termination of employment of that employee.
43 See articles 1442 and 1443 of Mejelle, supra n. 8. Article 1443 of Mejelle reads, “Subsequent ratification has the same effect as
a previous authorization to act as agent.”
44 For conventional law, see Williams v. North China Insurance Co, (1876) 1 CPD 757, where an agent entered into an insurance
contract on behalf of the principal without the authorization but the principal was allowed to ratify the insurance contract
after the loss of the insured property (i.e., ship).
46 See article 1479 of Mejelle, supra n. 8. Hanafi jurists made a distinction in this regard between a buying agent and a selling
agent. When a buying agent buys something without following the instructions of the principal and the transaction is not
beneficial for the principal, the agent would be considered the buyer of the product. On the other hand, when a selling
agent fails to follow the instructions of his principal to the disadvantage of his principal, the contract of sale would be
suspended upon the approval of the principal. See articles 1470 and 1494 of Mejelle, supra n. 8. This is due to the possibility
that a buying agent may buy something for himself and may give it to his principal when the agent realizes the transaction
was disadvantageous. This kind of possibility does not exist in the case of a selling agent. See AL-ZUHAILI, supra n. 17 at
667. On the other hand, if the agency of a buying agent is unrestricted, most Islamic jurists still state that the agent’s
actions would be implicitly restricted by conventions i.e., the purchased item must be free from defect and fit for the
purpose and the price should be close to or below the market price. AL-ZUHAILI, ibid at 667-668.
47 See Turpin v Bilton (1843) 5 Man & G 455, where an agent was liable for the loss of uninsured vessel because the agent
neglected to follow the instructions of the principal to insure the vessel.
the principal when the agent follows the instructions even if the instructions appeared to be a
bit imprudent from the very beginning.48
A transaction entered by an agent in violation of the principal’s instructions, especially as to

the nature of the thing to be purchased, would be considered as a transaction concluded for the
agent himself and not for the principal.49 For example, if the principal asks the agent to buy a
goat but the agent buys a sheep, the contract would be concluded for the agent and not for the
principal.50 Under conventional law, a similar result would also ensue unless the third party to
the transactions can prove that the action falls under the agent’s implied or apparent authority.
However, the principal may bring a recourse action against the agent for such an unauthorized
but binding transaction.51 As mentioned earlier, both under conventional law and Islamic law
the principal may ratify an unauthorized transaction and would be bound by the ratified
transaction.
b) Duty to exercise due care

In performing the tasks assigned, an agent must exercise proper care i.e., care which a
reasonable person in the agent’s position would exercise. This is especially the case if the agent
works for fees.52 If the agent is not a paid agent, he still has to exercise the level of care which
he would exercise in his personal transaction.53 In other words, even a gratuitous agent has to
perform the task with certain degree of care. Such an agent would be liable for negligent
performance unless he could prove that he would have conducted the transaction in the same
manner even if it were for himself. The difference in the levels of care required to be taken by a
paid agent and a gratuitous agent is that the former has to take reasonable level of care (an
objective test) while the latter has to take subjective level of care (i.e., the level of care he would
take for his personal transaction).
Under conventional law, however, both a commissioned agent and a gratuitous agent have to
exercise reasonable care in performing the delegated task.54 Another difference maintained in
the conventional law is between nonfeasance (non-performance of the delegated task) and
misfeasance (negligent performance of the delegated task). While a gratuitous agent would be
liable only for misfeasance,55 a paid agent would be liable for both nonfeasance and
misfeasance.56 The reason for the difference lies in the doctrine of consideration. As there is no
48 See Overend & Gurney Co v Gibb, (1871-72) LR5 HL 480, where the purchase of an existing business by the directors of a
new company turned out to be a financial disaster, the directors (i.e., agents) were not held liable.
49 Article 1470 of Mejelle, supra n. 8.
50 Article 1471 of Mejelle, ibid.
51 See ARCHER, supra n. 15 at 189-191.
54 See Solomon v Barker (1862) 2 F&F 726, where selling agents were held liable for not exercising due care to ensure the best
price for the goods sold on behalf of the principal; see also section 277 of the Commercial Code, supra n. 2.
55 See Chaudhry v Prabakhar, [1989] 1 WLR 29, where a friend (i.e., a gratuitous agent) who helped a new driver to buy a used
car was found negligent and liable for the un-roadworthy car.
consideration in the case of a gratuitous agency, the agent would not be liable for any failure to
perform the promised task.57 Under Islamic law on agency, this distinction is not maintained.
c) Duty to avoid conflict of interest

Under both Islamic law and conventional law, an agent must not have any conflict of interest
in a transaction concluded for his principal. Thus, under Islamic law an agent who is
authorized to purchase a specific object or a unique item (e.g., a specific house) cannot buy it
for himself.58 If the agent buys the specific object for himself, the purchase would be considered
as a transaction for his principal.59 Similarly, an agent authorized to purchase a product (e.g., a
horse) for his principal cannot sell the agent’s own product to his principal.60 Doing so would
put the agent in a situation where his personal interest as a seller would conflict with the
interest of his principal as a buyer. This is the view of the majority of Islamic jurists.61
Although a similar conflict would arise if a selling agent sells a product of his principal to
himself or to any of his close relatives, the Civil Code of Oman is silent about the invalidity of
such transaction. This is probably due to the difference of opinions among Islamic schools of
law. For example, Hanafi School does not allow a selling agent to sell the product of his
principal to himself,62 while some jurists from other schools see no problem with such a sale.63
It is noteworthy here that Islamic law on agency and the Civil Code of Oman do not provide a
general or normative principle on conflict of interest in the context of agency. Islamic law only
discusses some specific examples where a conflict of interest would arise. In this regard,
conventional law on agency is broader and would cover any conflict of interest no matter how
they come to exist. Under conventional law, agents are considered as a fiduciary and owe
single-minded loyalty towards their principals. As such, agents cannot make any profit other
than their commission out of the transactions they bring into conclusion for their principals
without the knowledge or permission of the principals.64
d) Duty to perform the delegated task personally

Under Islamic law, an agent must personally perform the task he is assigned for.65 He cannot
delegate the work to another agent without the permission of the principal.66 For example, a
57 ARCHER, ibid at 189.

58 Section 688 of the Civil Code, supra n. 3.
59 Article 1485 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 668.
60 Section 688 of the Civil Code, supra n. 3. According to Imam Abu Hanifa, a buying agent is not also allowed to buy from his
close relatives whose testimony for the agent would not be acceptable in a court of law. As for Abu Yusuf and
Mohammad, such purchase is allowed as long as the price paid is at or below the market price. AL-ZUHAILI, ibid at 669.
61 Article 1488 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 669.
62 Article 1496 of Mejelle, supra n. 8. Imam Abu Hanifa does not allow a selling agent to sell even to his close relatives, whose
testimony for him would not be allowed in courts (e.g., father, son, wife, grandson etc.), at or below the market price
because family members may share the use of such property. This view was adopted in article 1497 of Mejelle, supra n. 8.
On the other hand, Abu Yusuf and Mohammad allow such sale at market price because family members do not share the
ownership. See AL-ZUHAILI, ibid at 664-665.
63 AL-ZUHAILI, ibid at 665.
64 See MUNDAY, supra n. 9 at 161-169 para 8.15-8.28; ARCHER, supra n. 15 at 193-195.
65 Section 683(1) of Civil Code, supra n. 3.
legal agent appointed to represent the principal in a case cannot delegate the task to a second
agent without the permission of the principal.67 This is because the principal has probably
hired a specific agent for his or her special skills, personal honesty, and other individual
qualities. The second agent may not have those qualities. If, however, the principal permits the
agent to hire a sub-agent and specifies the sub-agent, the sub-agent would be considered as a
direct agent of the principal and not as an agent of the first agent.68 On the other hand, if the
permission to appoint a sub-agent is general and does not specify the sub-agent, the first agent
would remain responsible for any fault in appointing the sub-agent or in giving him
instructions.69
Conventional law on the appointment of sub-agent contains similar rules. In general, an agent
cannot delegate his authority to a sub-agent without an express or implied authorization of the
principal. A legal doctrine under conventional law states, ‘delegated authority cannot be
delegated.’70 Thus, the principal would not be bound by a transaction entered by a sub-agent
appointed without any express or implied authorization unless the principal later ratifies the
transaction.71 On the other hand, if a sub-agent is appointed with the express or implied
authority of the principal, the first agent would not be liable for any fault or negligence of the
sub-agent.72 Like the case with Islamic law, under conventional law also the liability of the first
agent is limited to the negligence of the first agent in selecting the sub-agent.73 The instances of
implied authority to appoint sub-agents include the situations when it is customary to do so in
a particular business, or when the nature of the transaction requires such appointment.74 If the
sub-agent is appointed with the express or implied authorization of the principal, the sub-
agent becomes a direct agent of the original principal.75
If multiple agents are appointed for the same task, they may be appointed either under one
contract or under separate contracts. If they are appointed under one contract and the contract
does not specify separate aspects of the task for each agent, they must perform the task jointly
unless the particular activity cannot be completed jointly (e.g., oral legal defense) or the nature
of the transaction does not require any consultation with each other (e.g., debt collection or
debt payment).76 On the other hand, if multiple agents are appointed under separate contracts
66 This is the general rule. All schools make some exceptions to the general rule. For example, Hanafi jurists allow the
appointment of a second agent if the principal gives the agent wide discretion to do whatever is necessary to accomplish
the task. In such case, the agent (e.g., a debt collecting agent) can appoint a second agent to do the task. If no such
discretion is given, the appointment of the second agent is invalid. In the context of debt collection, the collection of debt
by such an unauthorized second agent would not discharge the debtor from his liability toward the creditor. The Shafi‘i
and Hanbali jurists allow a second agent if the first agent is not able to perform the task. The Maliki jurists allow the
appointment of a second agent if the performance of the task is against the social status of the first agent. See AL-ZUHAILI,
supra n. 17 at 658-659; article 1466 of Mejelle, supra n. 8.
67 AL-ZUHAILI, ibid at 656; article 1463 of Mejelle, supra n. 8.
69 Section 683(2) of Civil Code, ibid.
70 See ARCHER, supra n. 15 at 100- 101. This is based on a Latin maxim, Delegata potestas non potest delegari; cited in ARCHER,
ibid at 101.
72 Dorcester & M. Bk. v. N. E. Dk., 1 Cush (Mass.) 177; cited in ARCHER, supra n. 15 at 103.
73 See Barnard v. Coffin, 141 Mass. 37, 55 Am. Rep. 443; cited in ARCHER, supra n. 15 at 104.
74 ARCHER, supra n. 15 at 101-103.
75 ARCHER, supra n. 15 at 104; see also section 279 of the Commercial Code of Oman, supra n. 2.
for a task, they should act independently unless the principal asks them to work jointly.77
When the task is supposed to be completed jointly by multiple agents, all the agents would be
jointly liable for the task.78 The provisions of the Civil Code with regard to multiple agents
reflect mainly the view of Hanafi School.79
In this regard too, the approach of the conventional law appears to be mostly similar to that of
Islamic law i.e., the instructions and the intention of the principal would determine whether
multiple agents are supposed to work jointly or separately. Thus, when a principal appoints
multiple agents to perform the same task, the agents must act jointly unless expressly indicated
otherwise. If one of the agents acts alone, the transaction would not be binding on the
principal.80
e) Duty to protect the principal’s property

Both under Islamic law and conventional law, an agent must protect the property of his
principal under his control. In Islamic law, the legal status of the principal’s property under an
agent’s control is that of a deposit.81 As such, the agent is not responsible for any loss of or
damage to the property unless such loss or damage is due to the agent’s negligence or
transgression.82 However, an exception to the above rule is mentioned in Mejelle.83 When a
purchasing agent buys a product for his principal with the agent’s own money or on credit and
retains the purchased product in order to secure the payment of the price from the principal,
the loss of the product in such case would be borne by the agent. This is probably due to the
distinction Hanafi School makes between ‘deposit’ and ‘pledge’. When the agent holds the
purchased object as a means to ensure the payment of the price, the status of the purchased
product in the hand of the agent would change from ‘deposit’ to ‘pledge’. Destruction of the
pledged property in the possession of a pledgee creditor would dissolve the debt up to the
value of the pledged property.84 In case of any dispute between the principal and the agent
with regard to the cause of the loss, the statement of the agent would be accepted if supported
by an oath under Islamic law. The principal can prove otherwise by bringing evidence.85

79 See article 1465 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 679-681.
80 See ARCHER, supra n. 15 at 41-42; Loeb & Bro. v. Drakeford, 75 Ala. 464 H. 42; cited in ARCHER, ibid at 42.
81 This is regardless of whether the agent is considered as a ‘messenger’ or ‘agent’. See articles 1463, 1464, and 1500 of Mejelle,
supra n. 8; see also AL-ZUHAILI, supra n. 17 at 675-677.
83 See article 1492 of Mejelle, supra n. 8.
84 Even though Hanafi School considers a pledged property in the possession of a creditor as a possession of ‘trust,’ the
School changes the status of the pledged property into the possession of ‘guarantee’ with regard to its financial
consequence in securing the debt. Thus, the destruction of the pledged property would be the destruction of the guarantee
and would absolve the debt up to the value of the pledged property. On the other hand, the non-Hanafi schools consider
the possession of the pledged property by the creditor as the possession of trust under all circumstances. The destruction
of the trust in the possession of trustee (the pledgee creditor) would not bring any liability on the trustee unless the
destruction is due to any negligence or transgression on the part of the trustee. As a result, the destruction of the pledged
property in the possession of the creditor would not absolve the debt. See AL-ZUHAILI, supra n. 17 at 166-167 (v. 2)
85 Hanbali jurists require proof from the agent if the cause of the loss claimed by the agent is fire, breakage, or any other
observable events. AL-ZUHAILI, supra n. 17 at 675-676. The general rule under Islamic law is that default position can be
supported by an oath and any exception to the default position must be proven by evidence. For example, if there is any
Under conventional law too, an agent is not liable for the loss of or damage to any property of
his principal due to any external cause or inherent defect in the property.86 In other words, the
agent would be liable for the loss or damage of the property only if the loss or damage is
caused by the agent’s own negligence. If there is dispute with regard to the cause of the loss,
the agent has to prove an external cause or inherent defect in order to avoid liability.87
f) Duty to disclose the identity of the principal

As for the agent’s duty to disclose the name of his principal in a transaction, Islamic law on
agency sometimes makes a distinction between an ‘agent’ and a ‘messenger’. When a person
enters into a transaction on behalf of someone else and discloses the identity of the person for
whom the former is making the transaction, the former is considered as a messenger of the
latter. If the identity of the latter is not disclosed, the former is considered as an agent. An
example is given under article 1454 (2) of Mejelle,
“A sends B to a horse-dealer to buy a horse. B tells the horse-dealer that A

wishes to buy a certain horse from him. The horse-dealer informs B that he has
sold A the horse for so much money and asks B to inform A of this fact, and to
deliver the horse to him. B does as requested and hands the horse over to A. A
accepts forthwith. A sale has been concluded between A and the horse-dealer. B
has merely been a messenger and intermediary between the two, and not an
agent.”
However, no such distinction is made under conventional law on agency. In fact, the above
example would be considered as an example of agency under conventional law. Under
ordinary circumstances, an agent must indicate in a contract entered with a third party on
behalf of his principal that that he is acting as an agent. Otherwise, the agent can be sued
personally by the third party for the contractual obligations.88 However, the difference between
Islamic law and conventional law here seems to be a matter of terminology and nomenclature
(‘agent’ v. ‘messenger’). In practice, both Islamic law and conventional law would consider the
above transaction concluded between the principal and the third party.89
Even Islamic law on agency does not always maintain the above distinction between ‘agent’
and ‘messenger’. Under Islamic law, there are some transactions in which an agent must
mention the name of the principal. Otherwise, the transaction would be considered as
concluded for the agent himself. Strictly speaking, these transactions should be considered as
concluded not by an ‘agent’ but by a ‘messenger’ because under Islamic law when a person
mentions the name of the person on whose behalf he is entering the transaction, he is
considered simply as a ‘messenger’. However, Islamic schools refer such intermediaries as
disagreement about the existence of an agency, the default state is non-agency. Thus, if a supposed principal claims non-
existence of an agency, the principal would be believed if he takes an oath. AL-ZUHAILI, ibid at 677.
86 Section 283 of Commercial Code, supra n. 2.
87 See 283 of Commercial Code, supra n. 2. Section 283 makes the agent liable for any loss of the principal’s property under his
possession unless the agent can prove an external cause or inherent defect in the property.
89 See also articles 1461(3) and 1462 of Mejelle, supra n. 8.
agents. These transactions include marriage, gift-giving, donation, deposits, loans,90 pawning,
partnerships and silent partnership.91 Similarly, section 684 of Civil Code also states that the
name of the principal must be indicated in the following transactions: donation, borrowing,
pledge (mortgage), deposits, giving loans, partnership, silent partnership, settlement on denial
of rights.92
Also, in some transactions the agent must clearly indicate whether he is making the transaction
for himself or for his principal. Indication that he is acting on behalf of someone else does not
change his status from ‘agent’ to ‘messenger’. These transactions include contracts of purchase
or sale, lease, and settlement on admission of rights.93 This rule reflects the view of the majority
of Islamic jurists. If the agent relates these contracts to his principal within the limits of his
authority, then all the rights of the contract will be for the principal and the principal would be
the contracting party. If the agent makes himself a party to these contracts without declaring
that he is contracting in his capacity as an agent, then the rights of contract will be for him.94
Contract rights include the receipt of goods or price, the return of the sold goods due to defect
or based on inspection option etc.95
Under conventional law, a properly authorized transaction concluded by an agent in which the
agent does not disclose the identity of the principal will still be binding on the principal. If the
principal does not take the responsibility for the transaction, the other party to the transaction
may elect either the principal or the agent in order to implement contractual rights and
obligations.96 This is in contrast to the right of a principal to ratify an unauthorized transaction
in which his identity disclosed. If the identity of the principal is not disclosed in an
unauthorized transaction, the non-disclosed principal would not be able to ratify the
transaction.97
g) Duty to give proper account

Finally, both under Islamic law and conventional law an agent has the duty to give the correct
account of the transaction entered on behalf of the principal. Section 689 of Civil Code requires
that the agent provide the principal with the necessary information the agent received in
performing the task and also give an account of all the expenses incurred and the profits
made.98
90 Islamic schools are in agreement that borrowing would not be effected through agency. AL-ZUHAILI, supra n. 17 at 640.
91 See article 1460 of Mejelle, supra n. 8; AL-ZUHAILI, ibid at 648-649.
92 The reason behind this rule is probably the fact that most of these transactions impose pure financial obligation or they are
of very private nature.
93 Section 685 of the Civil Code, supra n. 3.
95 See the examples under article 1461 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 670-671.
97 See ARCHER, supra n. 15 at 89-90, 125.
98 For similar duty under conventional law, see ARCHER, supra n. 15 at 196-198; section 285 of the Commercial Code of Oman,
supra n. 2.
2. Rights of an agent
Both under Islamic law and conventional law,99 an agent has three main rights: the right of
commission for the work done, the right to reimbursement for the expenses incurred, and the
right to indemnification for any liability faced in performing the delegated tasks. This is also
clearly mentioned under the Civil Code of Oman. The principal must pay an agent the agreed
remuneration upon the completion of the delegated task.100 If the remuneration is not agreed
and the agent is someone who is known to work for remuneration, the remuneration would be
a reasonable amount usually given for such task.101 Remuneration is due upon the completion
of the task.102 If no remuneration is agreed and the agent is not known to be someone who
works for fees, the agent would be considered a volunteer and would receive no
remuneration.103
In addition, if the agent incurs any expenses in the performance of the delegated task, the
principal has to reimburse the agent for reasonable expenses.104 For example, an agent for
purchase is entitled to reimbursement of any price he has paid from his own pocket.105
Similarly, if the agent incurs any liability or obligation, the principal must indemnify the agent
for such liability or obligation,106 provided that such liability or obligation is not incurred due
to any negligence or misconduct on the part of the agent. For instance, the principal would take
any losses incurred by the agent in the performance of his task.107
Part 3: Termination of Agency

The last part of the provisions on agency under the Civil Code deals with the termination of an
agency contract. Termination of an agency contract occurs either automatically i.e., due to the
operation of law, or by the parties either unilaterally or mutually. Under Islamic law, agency is
considered a permissible (jaaiz) but a non-binding (ghair-laazim) contract. As such, the contract
can be terminated at any time by either party. However, if the agency involves the right of a
third party, it cannot be terminated without the consent of that third party according to Hanafi
School as well as most jurists from Maliki School.108 The example of an agency related to the
interest of a third party is the appointment of an agent to sell a mortgaged property to satisfy a
debt when the debt becomes due. Termination of such an agency would affect the right of the
creditor in getting the debt paid on time.109 Thus, the agency in this case cannot be terminated
without the consent of the creditor for whose benefit the agent was appointed. Mirroring
Islamic law on the issue, the Civil Code provides that if termination of an agency contract would
99 For conventional law on the rights of the agent, see ARCHER, supra n. 15 at 172-180.
102 AL-ZUHAILI, supra n. 17 at 673.
103 Section 690 of Civil Code, supra n. 3; article 1467 of Mejelle, supra n. 8.
105 Article 1491 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 673-674.
108 AL-ZUHAILI, ibid at 684-685; articles 1521 and 1522 of Mejelle, supra n. 8.
109 See article 1521 of Mejelle, ibid.
affect the right of a third party, neither the principal nor the agent can terminate the contract
without the consent of the third party.110
Although stated in different terminology, similar result would also ensue under conventional
law. Under conventional law, an agency becomes irrevocable when the authority of an agent is
coupled with an interest or obligation i.e., the interest of a third party is involved and the agent
would be personally liable to meet some obligations arising under the agency.111 Thus, it was
held in a case that when the principal transferred a piece of real estate to the agent as a security
for the benefit of a third party creditor, the death of the principal did not to terminate the
agency contract.112
Even though Islamic law does not consider any earlier termination of agency as a breach of
contract, compensation is allowed to the non-terminating party for any loss suffered due to
untimely termination.113 Thus, if the agent has already started doing the assigned task and has
completed part of it, termination of the contract by the principal may cause financial loss for
the agent. Similarly, if the agent leaves the job incomplete, the principal may also suffer some
financial loss to start the task all over again. In the same vein, conventional law also imposes
liability on the party whose untimely termination causes loss to the other party to an agency
contract. However, such a termination is considered a breach of contract under conventional
law.114 An untimely termination occurs, for example, when the agency is for a specific period of
time and the agent leaves the job in the middle of the contract causing loss to the principal.
However, if the contract allows either party to terminate the contract at any time, no liability
would be imposed on the terminating party.115
As per the grounds of automatic termination of agency, section 694 of the Civil Code provides
that an agency contract would be automatically terminated with 1) the completion of the task
assigned,116 2) the expiry of the fixed term,117 3) death or legal incapacity of the principal unless
the agency is related to the right of a third party, 4) death or legal incapacity of the agent even
if the agency is related to the right of a third party. These rules are reflective of Islamic law on
the subject.118 These are also grounds for automatic termination of agency under conventional
law.119
With regard to insanity, Islamic schools of jurisprudence differ on the effect of short term
insanity on agency. Shafi‘i School considers the agency automatically terminated due to the
110 Sections 696 and 697(1) of Civil Code, supra n. 3.

111 See ARCHER, supra n. 15 at 208-210
112 Ronald v. Coleman, 76 Ga. 652, H 203; cited in ARCHER, supra n. 15 at 209.
113 Section 696 and 698(1) of Civil Code, supra n. 3.
114 ARCHER, supra n. 15 at 208 and 211.
116 The task may be completed either by the agent or by the principal. If the principal completes the task, the agency would
have no purpose left and thus automatically terminated. See AL-ZUHAILI, supra n. 17 at 685. In addition, if it becomes
impossible to complete the task due to the fact that the object of agency is perished, the agency would be terminated
automatically. AL-ZUHAILI, ibid at 687.
117 Agency will also terminate with the expiry of the fixed-term agency according to most non-Hanafi jurists. AL-ZUHAILI,
supra n. 17 at 689.
118 See articles 1526-1528, and 1530 of Mejelle, supra n. 8.
119 See ARCHER, supra n. 15 at 207 (for the expiry of the term and for the completion of the task) and 211 (for the death and
insanity of the principal).
insanity of either the agent or the principal even if the insanity is for a short term. On the other
hand, non-Shafi‘i jurists do not consider agency contract terminated in the case of temporary
insanity. Insanity for less than a month is considered ‘short term’ insanity according to the
majority Hanafi view.120 The Civil Code of Oman seems to follow the view of Shafi‘i School on
this matter as there is no mention about any specific duration of insanity for the purpose of
legal incapacity. Under conventional law too, the insanity of the principal or the agent would
also terminate the relationship of agency and there is no qualification with regard to the
duration of insanity.121
In classical Islamic jurisprudence, there are also discussion and differing juristic views on the
effect of apostasy (riddah) of a principal or an agent on the agency contract. According to
Hanbali School, apostasy of a principal or an agent would not terminate the agency contract
mainly because faith is not a condition for a valid agency contract. Other schools have different
views. The Civil Code of Oman does not mention apostasy at all as a ground for termination of
agency. This is probably due to the fact that apostasy is not considered a crime under the Penal
Code122 of Oman.
The Civil Code does not also mention the effect of bankruptcy on agency contract. Under the
Commercial Code of Oman bankruptcy of an agent is considered as a ground for the termination
of the agency contract.123 However, legal incapacity as an automatic cause for termination of
agency under the Civil Code can be interpreted to include any ground for legal incapacity
including bankruptcy. Under conventional law, bankruptcy amounts to legal incapacity.124 In
the context of company law, the managers/directors of a company are considered as agents of
the company. When a company becomes bankrupt, these agents lose their usual authority to
do any transaction on behalf of the company.125 If the company itself works as an agent or
principal, dissolution of the company would bring an end to the agency contract.126 There is
also not much discussion on this issue under classical Islamic jurisprudence due probably to
the fact that bankruptcy is a modern legal concept and did not exist under classical Islamic law.
However, some Maliki jurists mentioned that if the agency contract is for the sale of the
principal’s property and the property is later transferred to or preserved for his creditors in a
bankruptcy situation, the agent cannot sell the property and the agency would be
terminated.127
The Civil Code does not include also any provisions with regard to a third party’s right in a
transaction entered by an agent either after his termination or during the existence of an
agency contract but exceeding his scope of authority. Conventional law requires a principal to
provide general notice of termination of an agent to the public and individual notice to anyone

121 See section 291 of the Commercial Code, supra n. 2; see also ARCHER, supra n. 15 at 211.
122 Royal Decree 7/74, published in Official Gazette (no. 52) (Ministry of Legal Affairs, Oman: April 1, 1974); amended by Royal
Decrees 12/97, 77/99, 4/2000, 72/2001, 75/2005, 6/2007, 52/2007, 36/2009.

123 Section 291 of Commercial Code, supra n. 2.
124 MUNDAY, supra n. 9 at 340 para 13.23.
125 Section 16 of Companies Law of Oman, Royal Decree 4/1974, supra n. 2; see also Pacific and General Insurance Co Ltd v. Haell,
[1997] BCC 400.

126 See MUNDAY, supra n. 9 at 340-341 para 13.23-13.24.
who has dealt with the agent before his termination.128 Otherwise, the principal may be liable
for the actions of a terminated agent under the concept of apparent authority. Under Islamic
law, a principal would not be liable for any action of an agent beyond the scope of his authority
or after the termination of agency. Since the Civil Code is silent on this issue, it seems that in a
non-commercial agency contract the rules of Islamic law would apply in such circumstances.
III. Conclusion
The provisions of agency law under the Civil Code of Oman reflect Islamic law on the subject.
The rules of Islamic law on agency are very similar to those of conventional laws. Islamic law
on the main issues of an agency contract such as the condition of agency and its types, the
rights and obligations of agents, and the termination of agency is comparable to conventional
law on agency. However, there are some minor differences in the details. While these minor
differences may become important in an actual case of agency, they do not affect the main
observation of the paper i.e., the existence of close similarity between Islamic law and
conventional law on agency contracts. Due to this close resemblance, it may be advisable for
Oman to have just one set of rules for all types of agency contracts instead of three different
sets of rules129 unless the minor differences between Islamic law and conventional law are
thought to be important for commercial agencies.
128 ARCHER, supra n. 15 at 210; see also section 292 of Commercial Code, supra n. 2.
129 See supra n. 5 to 7 and the accompanying text.

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Vol. 4 (2016) pp.

Agency Contract under Conventional Law and

Suggested citation style

This work is licensed under a Creative

Cover photo: © PRILL Mediendesign/Fotolia.com

Agency Contract under Conventional Law and

Part 1: Definition, Conditions, and Classification of Agency ............................. 110

Part 2: Duties and Rights of an Agent .................................................................... 116

Part 3: Termination of Agency ................................................................................ 123

III. Conclusion .................................................................................................................. 126

Alberta), LL.B (International Islamic University Malaysia)

2. Different Sets of Rules on Agency Contract in Oman

II. Agency under Islamic Law (as Reflected in the Civil

with fixed interest rates.

20 See AL-ZUHAILI, supra n. 17 at 639.

Part 2: Duties and Rights of an Agent

a) Duty to follow the instructions of the principal

A transaction entered by an agent in violation of the principal’s instructions, especially as to

b) Duty to exercise due care

c) Duty to avoid conflict of interest

d) Duty to perform the delegated task personally

57 ARCHER, ibid at 189.

e) Duty to protect the principal’s property

77 Section 682(1) of Civil Code, ibid.

f) Duty to disclose the identity of the principal

“A sends B to a horse-dealer to buy a horse. B tells the horse-dealer that A

g) Duty to give proper account

Part 3: Termination of Agency

102 AL-ZUHAILI, supra n. 17 at 673.

104 Section 691 of Civil Code, ibid.

105 Article 1491 of Mejelle, supra n. 8; AL-ZUHAILI, supra n. 17 at 673-674.

106 Section 692 of Civil Code, supra n. 3.

107 AL-ZUHAILI, supra n. 17 at 673.

109 See article 1521 of Mejelle, ibid.

110 Sections 696 and 697(1) of Civil Code, supra n. 3.

113 Section 696 and 698(1) of Civil Code, supra n. 3.

114 ARCHER, supra n. 15 at 208 and 211.

115 See ARCHER, supra n. 15 at 210-211.

insanity of the principal).

120 AL-ZUHAILI, supra n. 17 at 685.

Decrees 12/97, 77/99, 4/2000, 72/2001, 75/2005, 6/2007, 52/2007, 36/2009.

124 MUNDAY, supra n. 9 at 340 para 13.23.

[1997] BCC 400.

127 AL-ZUHAILI, supra n. 17 at 687.

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